Cisco, EMC tout VCE market share, but report losses

Cisco and EMC have posted some impressive figures for their VCE integrated infrastructure joint venture. It's hard to argue with a $1 billion annual revenue run rate and 1,000 Vblock converged infrastructure systems.

The catch: Cisco and EMC left out one big statistic on its run toward No. 1 market share: Both companies are losing a lot of dough on the VCE joint venture. Apparently 57.4 percent market share according to Gartner requires some losses up front.

According to SEC filings, EMC has lost $430.2 million on VCE since inception through Sept. 30. EMC invested $667.2 million in funding for 58 percent of VCE equity.

Meanwhile, Cisco invested $457 million for a 35 percent stake in VCE and has a cumulative loss of $325 million as of Jan. 26.

VCE was formed in Nov. 2009 by Cisco and EMC with investments from Intel and VMware. The idea was to create a partnership that could go toe-to-toe with the likes of IBM and HP and integrate systems as if Cisco, EMC and VMware were one company.

Profitability for VCE is a bit of an unknown. For instance, Cisco and EMC both report their expenses for VCE as losses. The nuance is that revenue from VCE flows into the partner companies. Cisco's networking gear in a VCE system flows into the company's sales. EMC collects storage revenue and VMware gets virtualization sales. As a result, VCE revenue is hard to track and a key requirement when it comes to gauging the venture's true profitability.

Earlier this week, HP updated its converged infrastructure offerings. The VCE vs. HP duel is worth watching.